Maharatna CPSE Offers Rs. 6.75 Dividend, Revenue Up 70% YoY, Buy Stock For 35% Return: Motilal Oswal

Largecap stocks are known for giving high returns in the long term. With a 534.22% upside in the last five years, Maharatna CPSE ONGC is one of the top oil and gas stock picks for investors. leading brokerage firm Motilal Oswal has given a buy rating to the stock of ONGC. The PSU company recently announced an interim dividend of Rs. 6.75/share, making it more profitable for the shareholders.

Stock To Buy: Target Price

The Current Market Price (CMP) of ONGC is around Rs. 142. Motilal Oswal has estimated a Target Price for the stock at Rs. 192. This stock has the potential to give a 35% return, in the upcoming 12 months. This largecap PSU has a market capitalization of Rs. 179,331 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 142
Target Price	Rs. 192
Potential Upside	35.00%
52-week high share price	Rs. 194.95
52-week low share price	Rs. 119.85

Quarterly earnings

ONGC's 2QFY23 EBITDA stood at Rs. 188.1b, with 42% YoY gain. Reported PAT came in at Rs. 128.3b. Crude oil and gas sales both were in line with our estimates at 4.8mmt and 4.2bcm, respectively. In 1HFY23, ONGC's revenue stood at Rs. 806.4b, with 70% YoY gain, while EBITDA stood at Rs. 447.4b with 76% YoY gain. Reported PAT grew 24% YoY to Rs. 280.3b. Net oil realization stood at USD90.3/bbl (+34% YoY).

Stock Valuation

Giving a buy rating, Motilal Oswal stated, "Although the ramp up in oil and gas production has been a sore issue for investors, the rise in oil and gas prices is likely to result in a 1.5x jump in its FY24E adj. PAT v/s that of FY22 on a standalone basis. ONGC is trading at 1.4x FY24E EV/EBITDA and 2.2x FY24E P/E. We value the company at 3.5x FY24E adj. EPS of Rs. 43.4 and add the value of investments to arrive at our TP of Rs. 192. Reiterate buy with a 35% potential upside."

Oil production & net oil realization

After a long time, the production of oil and gas appears improving. Domestic production of oil is expected at 22.8mmt in FY23, 24.6mmt in FY24 and 25.7mmt in FY25. Gas production guidance, on the other hand, stands at 22.1bcm in FY23, 25.7bcm in FY24 and 27.5bcm in FY25. The windfall tax has been gradually reduced to Rs. 9,500/mt in Nov'22 to date from Rs. 23,250/mt in July, 2022, in line with the decline in oil prices. Consequently, we have raised our net oil realization for 3QFY23E to USD79/bbl, which has led to an upgrade in our revenue/EPS estimates by 7%/11% on standalone basis, respectively, for FY23, the brokerage firm added.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.